Need advice on wood pricing

[Alexander]

Hello all.

Bare with me as I am brand new to sawmilling and have a lot of questions.

I got a Woodland Mills sawmill a few months ago and started selling wood with it however from what I could find I am really uncertain of what kind of prices I should be charging and there has been a lot of interest from people wanting lumber from me so I need to get my pricing straight.

Right now I have only sold red oak and I have been selling it at $1.25 a board foot. I am doing that price based on what I found somebody else saying they were selling it for. Other than that I am really not sure what to charge for other species. For example I have somebody interested in yellow pine and cherry but I'm not sure what to charge per board foot.

Also I have somebody interested in me cutting their logs for them. One person wants me to cut their pine log and I have somebody else who wants me to cut their oak logs.  I have seen other Sawyers give pricing around $60 dollars an hour, and I also seen some "it depends" when it comes to pricing of cutting somebody else's wood.

And lastly, I have also bought wood to mill myself and sell.  I bought 7 red oak logs for $175 (since it was all I had) however the guy I bought them from said it was pretty low but he would take it.  So basically I just need to know how do I go about buying logs from people.

Thanks a lot for any information

[gww]

My son in law bought a whole bunch of oak from somebody in MO for eightyfive cents a board foot.  There have been several threads posted on this site about what poeple are charging.  One of them mentioned $60 bucks an hour, so maby you have already read them.  I would try to post some links but would have to do the same as you and look them up.  You might try going through the first couple of pages under "samills and milling".  I will be interested in the responces to your question as I am new enough to not know this stuff also.  I also need to hear it several times for it to stick in my brain. 
Good luck.
gww

[WV Sawmiller]

Alexander,

   See my website under my details and see the prices I use here for cutting for others. I'd think Richmond would support this or better pricing as likely less depressed than we are here. I have sold tulip poplar off my place and get $.75/bf for it. Depending on the quality of the wood your prices for oak seem in line or a good bargain from what I see around here.

    I'd determine what it costs me to provide or cut the lumber then decide what kind of compensation I required for my time and equipment and set my prices accordingly. There are lots of people around me who cut lumber for others cheaper than me. They are stationary and I am mobile. I figure my mobility compensates for transport and loading costs and I am perfectly willing to turn down work where I would not receive reasonable compensation.

    Good luck.

[bkaimwood]

Best advice I could tell you is pricing varies VERY widely, depending on location, and can vary by double just by changing state, more so here in the northeast... I know a few saw at 50 an hour, 75 is average, and within 50-100 miles of me, guys are as high as 125 hr...as for lumber, average here is twice your...most so is most everything else...I see walnut anywhere from 3 bf to 15 on up a bf...the sawyers in your area can help you most, your own local research will help. Good luck!!

[woodmills1]

A dollar 25 is a very competitive oak price that will continue to get you customers.  I now charge $1.75 for lumber from my logs here in NH.  However, you cannot stay in business paying 85 cents and getting $1.25.  The over head will eat your money and when every thing is old and worn out you won't have the money to replace.

[longtime lurker]

How much to sell a board for is always relative to two things: how badly you need the sale and how much does the buyer need to buy it.

See heres the thing: it doesn't really matter what anyone else charges for the same product or service except in a very broad state of the market way. They might charge more for a batter product, or they might be cheap and rough. Some guys who charge by the hour might charge more but be faster then others... some guys who charge by volume might give a more dimensionally accurate board then the next guy down the road who doesn't bill so hard.

My opinion is that every miller needs to work out a couple of things. The first is how much it costs to run a sawmill, and break that into fixed and variable costs. Fixed costs are things like property leases or rents and rates, shed costs, finance payments on equipment, and for me its my basic take home wage that I need to keep my children fed. Variable costs are things like electricity, fuel, blade and equipment maintenance, additional staffing etc.
When you know your fixed costs you can know exactly how much it costs to have your sawmill sitting there and doing nothing, and believe me in this industry there are times when its cheaper to sit and do nothing then compete below the cost of production. Thats a lesson I learnt the hard way. You've got to have deep pockets to race the big boys to the bottom of the scale.
Variable costs vary (duh) depending on throughput. Saw more and they go up. Don't saw at all and you wont spend anything on blade maintenance for instance.
Anyway when you've got a handle on these you can work out how much it costs YOU to do a job. (Forget the guy down the road for a minute).
From there we need to factor in cost of logs, which is widely variable depending on species and grade and where you are.

Then we can begin to work out the cost of production, what it costs you to produce a board on average.

So say for me logs cost me around $200 a cube landed in the yard, call it 50c/BF for a round number.
My base cost of production is around $130 a cube, call that $0.30/BF to round it out.
My recovery rate sits on about 40%... so to get a cube of sawn I need to cut 2.5 cube of logs
So to get a sawn cube it costs me for 2.5 cube of logs, 2.5 cube of sawing costs = $800 odd dollars = around about $1.40 USD per board foot.
(Things are more expensive here, which is why that looks high. So it costs us more to run, but we sell higher too)

Only after you've got a handle on what it costs you to make something should you look at what you might sell it for. Obviously you dont want to sell below cost of production but in reality some things you'll sell below cost, some you sell at cost, some you make money on - which is a market demand thing. Premium products we make a lot on, and downgrade is break even at best for us - the economy of scale things hits smaller guys hard. It costs just as much to lease a Cat 950 class loader if it handles 2000t of logs a year as if it handles 12000 t for instance.

Basicly you need to keep really good track of where things are going for awhile so you can get a handle on what its costing you. Calculate recovery on logs so you reach a point where you can look at a log and get a pretty fair idea of how much you can recover from it, and look at grade so you know how much more you can make off better logs. Only then can you figure out what a log is worth to you, and know if your paying too much.

Only once you know what it costs you to produce can you work out what you need to charge to stay afloat. Everything after that is a bonus that you get to share with the guvernmint anyway. :D

[scsmith42]

Good insight from Longtime lurker above.

Here are a couple of posts that have some excellent insight.  One is about a business plan, the other is about pricing for kiln drying.  Although you did not inquire about drying pricing, the concepts contained in that thread may prove to be beneficial to you.

Best of success to you.

Scott

https://forestryforum.com/board/index.php/topic,61139.msg897881.html#msg897881

https://forestryforum.com/board/index.php/topic,39231.msg567303.html#msg567303